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Option agreements can yield benefits for farmers

An agricultural expert is giving his top tips for farmers hoping to see their land used for development by third parties.

Andrew Holden, head of Rural at Napthens solicitors in Penrith, has reported an increase over the last three years in the number of developers approaching landowners to seek planning application for residential development or renewable energy projects.

Developers seek what’s known as an ‘option agreement’ from the landowner, which means the developer has the option to buy the land within a fixed time period, for a price agreed between both parties.

Now Andrew is highlighting several factors which must be reviewed by anyone thinking about entering an option agreement.

Andrew said: “A typical agreement is for three to five years, however this can be extended if a developer’s planning application is ongoing. This may or may not suit the interest of the landowner, who should consider how this may affect future plans of the farm.

“Furthermore, the developer may want to buy the land in two or more stages, which means the landowner would need to ensure the land is not split into sections which restricts the use of unpurchased areas.

“It’s also worth remembering to be sure about how the purchase price is calculated, it might be that there are deductions involved, or sections of land such as open spaces and roads are excluded, which would affect the price.

“As with any property deal, it is imperative for all parties to seek legal advice before entering into an agreement.”